Mass Customisation: Tate & Lyle - Case Study Example

Mass Customisation: A Case Study of Tate & Lyle Introduction No further introduction is needed to the British firm of Tate & Lyle, than excerpts from the biography of one of its founders, Henry Tate: In 1878 Henry Tate & Sons opened Thames Refinery at Silvertown in East London, which is where Tate & Lyle-branded sugar is still made today. Henry Tate was created a baronet in 1898 and died in 1899.... He bequeathed his collection of contemporary paintings to the nation, forming the nucleus of the famous Tate Gallery, now known as Tate Britain. (“Henry Tate”) When it was established in 1878 the Thames Refinery specialized in newly invented cube sugar. Over 130 years later the site refines 1.1 million tonnes of raw cane. This sugar is refined to create a range of over 250 retail and industrial products, notably Lyles Golden Syrup. According to, Ian Clark, who manages the Plaistow, London factory where Lyle’s Golden Syrup has been made since 1883, “It is officially the oldest brand packaging in the world.” (“World Record for Iconic Goldie”) The famous tin, introduced in 1885, and celebrating its 125th anniversary this year, with its golden arch and biblical quotation - “out of the strong came forth sweetness", is now in the Guinness Book of Records as the oldest continuously in use packaging label. Lyle’s Golden Syrup label (Tate & Lyle) Upstream (which in geographical terms is downstream) of the refinery the supply chain is very rigid. The price of the raw cane and its availability is notably unstable, but this is a characteristic of all commodities. In every other sense the supply chain upstream is inflexible. Ocean transport is not amenable to JIT management and last-minute revisions. Moreover, the final stage that brings the raw cane up the Thames estuary and to the refinery is highly regulated and regimented. Deliveries are coordinated through the Port Authority and limited to once per week. Also, it is fundamentally only one product arriving, raw sugar cane. Downstream from the refinery the situation is entirely different. In fact it is the polar opposite. Most importantly, as the company website proudly proclaims over 250 products end up in consumers hands directly or indirectly through inclusion in other products. Packaged retail bagged sugar is the obvious product. Goldie, Lyles Golden Syrup is produced from a by-product of the refining process as are molasses and treacle. A variety of products leave the refinery for a variety of destinations, many involving further processing. The scale and complexity of the supply chain downstream is entirely different from the rigid, unitary supply chain upstream. Recognizing this situation and its increasing involvement with alternately sourced (notably corn-based) and synthetic sweeteners such as Splenda, Tate & Lyle choose to entirely leave the refining business. A company press release dated 1 July 2010 simply stated, “Tate & Lyle PLC (“Tate & Lyle”) announces today it has signed an agreement for the sale of its EU Sugar Refining operations (“EUS”) to American Sugar Refining, Inc. The consideration is £211 million payable in cash...” Javed Ahmed, Chief Executive of Tate & Lyle said, “Tate & Lyle’s clear priority is to grow its Speciality Food Ingredients business...This disposal will enable us to concentrate our resources on delivering our strategic objectives as we focus, fix and grow our business.”(“Tate & Lyle takes major step to focus business through sale of EU Sugar operations”, 2010) Mass Customisation The remainder of this discussion will look at the operations of the Thames refinery through the prism provided by mass customisation. Initially, therefore, mass customisation will be defined and illustrated. How mass customisation initiatives could have improve the profitability of the Thames refinery will be examined next. Then the impact that losing control of the refinery could have on Tate & Lyles current attempts to apply the principles and practices of mass customisation to their operations will be explored. Mass customization is more than personalization, more than the customer choosing a blue car or a red car in the salesroom. A textbook describes it as simply "producing goods and services to meet individual customers needs with near mass production efficiency". (Tseng and Jiao, 2001, p. 685) Graphically it was best represented by Pine a decade earlier. (Mass customisation may be all the rage today, but it is hardly an overnight sensation and has been in circulation for at least two decades.) In simplest terms it means giving the customer what they want. According to Joseph Pine, mass customisation is “developing, producing, marketing and delivering affordable goods and services with enough variety and customization that nearly everyone finds exactly what they want. (Pine, 1993) Mass Customisation: Pines Representation In Pines illustration product life-cycles shorten while demand fragments in a heterogeneous marketplace making customised products essential. At the same time, product development cycles quicken and computerized production and materials handling makes low-cost, high-quality customised products a real possibility. The result is the specificity of customisation and the efficiencies of mass production. That, in a nutshell, is mass customisation. Repeatedly, Dell Inc. is cited as an example of the optimisation of mass customisation. In the essential article “Cracking the Code of Mass Customization” they describe a customer purchasing online or through a call centre a computer system that they can build by component or purchase as a package with unlimited opportunities to tweek the package. New technology marketing, JIT production of customized computer systems and no storefront operations all characterise mass customisation. (Salvador, de Holan and Piller, 2009, p. 71) In another article Piller identifies “flexible manufacturing processes that applied digital technology to produce one-off orders efficiently and cheaply” and “online configurators [which allow users to upload photos and select designs online]” as the two technological developments that are driving mass customisation. (Beaton, 2010) Much of the buzz in the popular media has focused on the retail aspect of mass customisation. Consumers can purchase everything from custom tailored shirts to personally designed confectioneries. “Mass Customization is Taking Off”) A classic example of this narrow focus was a recent article in the Boston Globe that identified only retailers in a survey of mass customisation enterprises in the area. An area that also includes Harvard and MIT, home of the MIT Smart Customization Group, “an MIT-Industry collaboration devoted to improving the ability of companies to efficiently customize products, services, and experiences in various industries and for diverse customer groups.” (“MIT Smart Customization Group”) Mass Customisation and Tate & Lyle There is much more to mass customisation than retailing and that is why it is relevant to Tate & Lyle. The Thames refinery is an ideal location to introduce mass customization. Within the corporate supply chain it operates like a massive set of filtres. One product goes in (raw sugar cane) and hundreds of different products come out the other side sorted by sugar content, viscosity and a host of other variables. Anything that can be done to facilitate this complex process is important. This is true in more ways than immediately is apparent. On the surface, there is the obvious direct cost-saving if these processes can be streamlined and completed more cost-effectively. Additionally, there can also be value-added for the customer (achieved at a lower cost to the company) if streamlining the processes at the refinery saves time as well as money. The time it requires to deliver an order may be reduced and that will constitute value added for some customers. The specificity of orders may also be increased. Effective mass customisation would permit the refinery to deliver product to customers in the units that they require in their operations to reduce the need for the customer to handle materials. For example, if a customer blends a refinery product into his chocolate at a rate of 515 litres per lot mass customisation would permit the delivery of the product in 515 litre containers. This saves time and labour for the customer and, again, constitutes value-added. Ultimately, this is the sole-justification for pursuing mass customisation. According to Salvador, de Holan and Piller turning, “customers heterogeneous needs into an opportunity to create value, rather than a problem to be minimized” is the raison detre for mass customisation. (Salvador, de Holan and Piller, 2009, p. 72) Clearly the diverse products leaving the Thames refinery going downstream and the fragmented markets both industrial (internal and external) and retail make it an ideal site for an effective mass customisation program. This is true regardless of the owner of the operation. If Tate & Lyle had retained ownership mass customisation of the handling of materials heading downstream would have reduced costs and offered customers value-added. The same is true now that the operation is owned by American Sugar Refining. In this sense, the change in ownership is not relevant to the issue of mass customisation at the Thames refinery. On another level, Tate & Lyles decision to leave the sugar refining industry could have negative consequences for broader elements of its attempts to institute mass customisation throughout its operations. In France Tate & Lyle opened the Lille Innovation Centre in 2008. It is the focus of the companys commitment to the third pillar of mass customisation, helping customers to identify their needs and to develop products that address, even anticipate, these needs. According to Paul Cornillon, R&D Director, Food & Industrial Ingredients, Europe, Middle East, Africa, “We tell customers: ‘we can help you, we know our ingredients, and we understand your needs. We can be the extra R&D department you do not have in house’.” The centre had been involved in the development of 200 products by the end of 2009. “Our technical knowledge allows us to not only take direction from our customers in terms of what they need, but to provide proactive development in the form of solutions and adapted recipes when they are faced with challenges...” says Paul Prendergast, Managing Director, UK Operations, Food Systems. (“A Factory for Innovation”) Moving completely out of the raw cane refining business may have undermined this research and development program, integral to mass customisation, of Tate & Lyle to some extent. In certain situations the cost of developing products and the time it takes may increase with Tate & Lyles loss of control of the Thames refinery. If their research and development team requires a particular refinery byproduct to be tweeked at the refinery to be appropriate for work at the Lille Innovation Centre, American Sugar Refining may not be as amenable, as quick to respond or as inexpensive as the refinery was when it was owned by Tate & Lyle. A similar problem could also arise with older, established Tate & Lyle brands. American Sugar Refining could, theoretically, introduce new processes for refining that might render some of the byproducts required for Tate & Lyle products unavailable or no longer appropriate. This does not apply to sweeteners from other sources and synthetics so it will not effect a majority of Tate & Lyle products (or research projects). However, it is a concern that merits note. Conclusions This survey of the issues surrounding mass customisation in the context of the Thames refinery allows a handful of tentative conclusions to be drawn. The nature of the refinery operation with a rigid flow of a single product, raw sugar cane, coming from upstream means that mass customisation offers few benefits here. (Indeed the single material and rigid transportation situation mean that few innovations of any type could be easily introduced.) However, at the downstream side of the refinery the opposite situation prevails. Hundreds of products and by-products are being shipped out to a variety of purchasers. Some go directly to the consumer. Some go to Tate & Lyle facilities to be used in the production of other products. Some are shipped to the Lille Innovation Centre for product development. Finally, some are shipped to other manufacturers who use Tate & Lyle products in their operations. This complicated supply chain with innumerable orders for a variety of products could benefit greatly from mass customisation initiatives. On the downside, the sale of the refinery may have a minor, negative effect on Tate & Lyles attempts to develop a research and development program intimately attuned to customer needs. Bibliography Beaton, Eleanor. (2010) “Custom Products: Give the People what they want” PROFIT. http://www.tim.rwth-aachen.de/download/press/2010-06_profit_-_give-the-people-what-they-want.pdf. Accessed 11 August 2010. “A Factory for Innovation”. http://www.tateandlyle.com/AboutUs/Casestudies/Pages/Afactoryforinnovation.aspx. Accessed 08 August 2010. “Henry Tate”. Web. http://www.tateandlyle.com/aboutus/history/pages/henrytate.aspx. Accessed 08 August 2010. Kirsner, Scott. (2009) "The Second Coming of Mass Customization" Boston Globe. Web. http://www.boston.com/business/technology/innoeco/2009/08/the_second_coming_of_mass_cust.html. Accessed 6 August 2010. MIT Smart Customization Group. http://scg.mit.edu/. “Mass Customization is Taking Off” http://crenk.com/mass-customization-is-taking-off/ Pine II, J. (1992). Mass Customization: The New Frontier in Business Competition. Boston, Mass.: Harvard Business School. Salvador, Fabrizo, Pabo Martin de Holan and Frank Piller. (2009) “Cracking the Code of Customization” Sloan Management Review. 50: 3, pp. 71-78. Sohns, Eckhard. (@009). “The Individuality Dilemma”. Pending Magazine. Web. http://www.tim.rwth-aachen.de/download/press/2009_pending_-_mc_the_individuality_dilemma.pdf. Accessed 7 August 2010. “Tate & Lyle takes major step to focus business through sale of EU Sugar operations” (Press-releases). 1 July 2010. Web. http://www.tateandlyle.presscentre.com/Press-releases/Tate-Lyle-takes-major-step-to-focus-business-through-sale-of-EU-Sugar-operations-383.aspx. Accessed 04 August 2010. Tseng, M.M.; Jiao, J. (2001). Mass Customization, in: Handbook of Industrial Engineering, Technology and Operation Management (3rd ed.). New York, NY: Wiley. “World Record for Iconic Goldie”. Web. http://www.tateandlyle.com/AboutUs/Casestudies/Pages/WorldrecordforiconicGoldie.aspx . Accessed 08 August 2010. Read More